The Minister of Economy, Luis Caputoand the president of the Central Bank of the Argentine Republic, Santiago Bausili, they stated “no date was set” for the exit of the exchange rate, but that this instance will be reached if “certain economic parameters” are met. They also explained that the process of transforming remunerated liabilities of the Central Bank into Treasury debt will be accentuated.
Likewise, they confirmed that will continue the crawling peg of 2% monthly for the update of the official dollar and the dollar blend 80/20 for exporters, which allows them to settle 20% of their foreign exchange in “cash with settlement.” Likewise, they pointed out that “there is no devaluation project nor is it true that the Fund has requested that.”
Caputo explained that after the first stage of closing the issue to cover the fiscal deficit, a second stage is now being started to stop issuing to cover the interest on the remunerated liabilities of the BCRA. Once these processes are completed, the minister assured, it will be the turn of the exchange controls: “The end of the currency controls is a third stage, which will be a stage of growth. We have not set a date, but rather macroeconomic parameters. We do not want to cause shocks to people, such as a potential rise in the dollar, which generates more inflation, unemployment and all the things that Argentines have already seen for a long time.”
“We want people to understand the robustness of the program and that this will allow us to deepen the disinflation process and thus give us time to get rid of the exchange restrictions when the conditions are right,” Caputo added.
“Getting out of the stocks is a third stage, which is going to be a stage of growth. We have not set a date, but rather macroeconomic parameters” (Luis Caputo)
The minister anticipated that there will be a reduction in the PAIS tax rate: “We are going to lower it, as we said from day one. It will be as soon as the Base Law is regulated and implemented and the Treasury begins to receive the income from the fiscal package. “It will probably be between August and September.”
Caputo and Bausili held a press conference this Friday at the Microcinema of the Palacio de Hacienda to announce a series of economic measures. The conference began after 6 p.m.
Bausili explained that the axis of this second part of the plan consists of “making the BCRA’s remunerated liabilities transparent” since they are based on the fiscal deficit, and therefore correspond to the Treasury: “In previous years when there was no access to financing, monetary emission was chosen, but the emission was more than what society demanded. So, every time that deficit was greater than demand, the BCRA had to reabsorb those pesos by placing liabilities that paid interest to make them attractive. That is how this imbalance was reached.”
“It is reasonable that interest rates will move into positive territory in real terms as private credit continues to grow and the economy grows” (Santiago Bausili)
To carry out this transfer of liabilities, Bausili explained, “there will be a sterilization mechanism, similar to what exists today with the BCRA repos, but they will be focused on a Monetary Regulation Letterwhich is where banks will place their excess liquidity. It will be managed by the BCRA, but it will be included in the Treasury’s balance sheet.”
The head of the Central Bank indicated that talks with the banks will begin on Monday for the implementation of this new Letter. And there will be no deadlines in its implementation. “The transactions made in the financial market are made at market terms and the BCRA continues to manage the one-day term through the monetary policy rate and the rest of the formation of the curve of financial instruments remains under the responsibility of the Treasury, which uses them to finance its debt maturities because it no longer has a deficit,” explained Bausili.
Regarding the future of interest rates, the president of the BCRA considered that “it is reasonable that they will go into positive territory in real terms as private credit continues to grow and the economy grows.” But he warned that he can speak “only about the interest rate of monetary policy, the rest are set by normal mechanisms based on the market.”
The officials were consulted about the low accumulation of reserves that the BCRA showed in June and recognized that the issue “generates some anxiety.” Bausili explained that the seasonality of the movement of reserves indicates that “during the harvest season it is common for reserves to accumulate and in the winter to lose reserves.” In the agreement with the IMF it was already contemplated that “from June to September reserves will be lost and in the last quarter they will be recovered.”
“In fact, it is stipulated that USD 3 billion will be lost. The fact that June ended where it did (- USD 54 million) is only a consequence of the fact that this winter started early. May was the coldest on record. That means we are importing more gas for heating. If July is milder, that may ease up a bit. It is not a surprise, it is what we expect and what we anticipate,” said the head of the Central Bank.
Regarding the negotiation of a new program with the International Monetary Fund and the request for fresh funds to get out of the trap, Caputo pointed out that “talk is just beginning” and that Argentina did not make any request for a specific amount to the organization.
Regarding the arrival of Federico Sturzenegger to the national cabinet, Caputo rejected that this would generate any conflict: “It is the opposite of what is said. He does a phenomenal job in a part that we within the economic team do not do. And it is as important or more important than what we do because Argentina is a tangle of obstacles and we are looking at the long term. And a fundamental part of the long term is to unravel this.” Far from worrying about Federico’s arrival, I celebrate it. We are totally compatible.. He does something that is fundamental for the country and he does it better than anyone else.”
The announcements came just after the approval of the Base Law and the fiscal package, two projects that the Government described as “foundational” for its political project. Earlier, the President Javier Milei He had said that a new monetary regime would be implemented following the decision of Congress.
Following the approval of the Bases Law in the Chamber of Deputies, the National government issued a statement through social networks where he highlighted that it will allow “the path towards the free and prosperous country that Argentines chose on November 19.”
